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SW Gas decision delayed

ANNE GROGAN and JOHN A. BAYLESS, Sierra Sun

The California Public Utilities Commission deferred until Jan. 6 its decision to either hold Southwest Gas Corp. to its original agreement with the Town of Truckee or to approve an alternate ruling that upholds the town’s new settlement with Southwest Gas, Town Manager Steve Wright said.

Wright said when the commission reconvenes in three weeks it will have a new member.

Gov. Gray Davis recently appointed Loretta Lynch to take the place of public utilities commissioner Joel Z. Hyatt..

Wright said the town never discovered Hyatt’s position on Judge Wright’s ruling, because the commissioner had been out of town before Lynch’s appointment was announced.

Southwest Gas sought in 1998 to revise its 1996 deal with the town through the CPUC’s Office of Ratepayer Advocates – increasing the 12.3-cent surcharge to 18.6 cents, extending its timeframe and scaling back the project to exclude Donner Lake as well as parts of Tahoe Donner and Prosser. The increased rates would have added $17.6 million to Truckee ratepayers’ costs.

Parties to the proceeding, including the CPUC’s Office of Ratepayer Advocates, initially agreed upon a settlement to recover most cost overruns from ratepayers.

As part of the proceeding, the CPUC conducted a public hearing in Truckee in February 1998, and the proposed settlement was discussed with potential customers.

Truckee residents protested, and pointed out that they had modified their homes to receive the natural gas promised to them, but that many of them were now being excluded from the expansion.

They objected to the increased facilities charge per therm that would occur if the settlement were approved.

Residents and representatives of the town made their concerns known in letters and in presentations to the CPUC by town delegations.

Southwest Gas filed a motion in August 1998 to stay the CPUC decision which ordered it to proceed with its project here at the original price.

The motion to stay the decision was filed in conjunction with a request for a rehearing of the commission’s decision on July 2, holding Southwest to the terms of its original agreement with the town.

The CPUC in September 1998 rejected the motion for a stay, and Southwest Gas filed a $15 million claim and later a federal complaint against the town, alleging that selective regulations enforced by Truckee caused the company to have a $15 million cost overrun while installing natural gas lines within the town limits.

Legal wrangling continued until the town and Southwest Gas reached a new settlement in March 1999.

The settlement package approved by the town and Southwest Gas in spring of 1999 will bring natural gas to all regions in Truckee covered by Southwest’s original agreement with the town – at the cost of extending the 12.3 cent surcharge for an additional period of time.

In its first six months operating under the new settlement, Southwest Gas installed almost 23 miles of gas mains throughout Truckee, expanding service at Donner Lake, in Tahoe Donner and downtown.

Southwest Gas experienced $15 million in cost overruns constructing Phase I and II of its project in 1996-97, and agreed in the settlement to absorb $8 million of those losses as a direct write-off by shareholders. An additional $2 million will be expended by the company to underwrite Donner Lake mains and services. A general rate-freeze extension for three additional years accounts for another $7.3 million, while carrying costs on a deferred plant will save ratepayers $3.3 million. In total, Southwest Gas will contribute $20.6 million in in-kind services, according to the proposed settlement.

The settlement provides that Southwest Gas will provide cash-in-kind benefits to the ratepayers of $20.6 million to offset the $15 million in cost overruns. Remaining construction commenced in June 1999 and will be completed on a specific schedule over the next three years under a guaranteed maximum price contract, with any cost overruns being the exclusive responsibility of the contractor.

The rates to be paid for the service will remain the same as those originally proposed, with an earlier removal of the surcharge if gas sales exceed current expectations. The surcharge will recover a maximum of $13.7 million in principal plus interest of 8.2 percent, and is expected to end in 2015.

Administrative Law Judge Orville Wright, who authored the original 1998 decision holding Southwest Gas to its original agreement with the town, recently wrote another ruling holding Southwest Gas to that deal.

CPUC Commissioner Josiah Neeper introduced an alternate ruling that upholds the town’s settlement with Southwest Gas, and town officials and staff have been lobbying for its adoption.

The CPUC will consider both rulings during its meeting Jan. 6.


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